Corporations

The pros and cons of them

What is it?

A corporation is a company that is owned by a group of people and is authorized by the state to act as one person. It might also have stock that people may or may not be able to buy, which will be explained later. The picture to the left shows all of the different companies that are corporations. On of the big deals to become a corporation is that the company has to obtain a Charter which is a piece of paper that shows that there are a company and corporation. A corporation has the condition of ease in transferring ownership which means that there is less of a problem if you transfer power from one person to another. Click on the picture to see all of the brands.

Which one is it?

There are two main types of corporations that exist. The open and closed type. The open type is allows any person to invest in the company and have money paid to them if the company makes a profit. The closed type is just the opposite-instead, the corporation chooses to keep the sale of stock in the company or within the employees. Either one can be done but its up to the corporation to decide.

What you have to do-and why.

There are many things that have to be done why think about starting a corporation because it is not something that you just can jump into. Each state has its own laws and regulations that manage how a corporation can be run. You have to state the purpose of the business and you have to declare how much capital that you can raise because of the fact that government whats to make sure that they are going to receive the correct amount of taxes that they demand.

Management Issues for Corporations


Sources of Capital- A corporation can obtain money from several sources and usually find borrowing large sums of money easier than a proprietorship or partnership because of the fact that they have more capital on hand.


Limited Liability- In a corporation the owners, directors, and managers are not legally liable for the debt of the corporation beyond their investment in the stocks.


Ease in Transferring Ownership- It is easy to transfer ownership of a corporation because whenever a stock is sold the person buying the stock receives a certificate saying hey own a certain part of the business.


Taxation- A corporation is subject to more taxes than a proprietorship or partnership. They pay a filing fee, organization tax, and an annual state tax.


Stockholders' Records- All stockholders must be informed on corporate matters, notified of meetings, and given the right to vote no matter how few stocks they own.


Agency Dilemma- An agency dilemma is whenever an agent looks for their own interests instead of their employers. Managers in a company may think about what is best for them but not for the various stockholders of the corporation